The Australian real estate market for the year 2024 is shaped by a complex interaction of economic factors, offering both challenges and opportunities for buyers, sellers, and property investors. As Australian real estate continues to evolve, market participants are closely monitoring trends to make informed decisions and capitalise on emerging opportunities.
Australian Real Estate: Defying Expectations in 2023
Despite continuous rate hikes in the previous year, the Australian real estate market resiliently rebounded, reaching record highs in several areas. The remarkable recovery was driven by a persistent low supply of homes, creating significant upward pressure on property prices. This supply-demand imbalance remains a key factor shaping the Australian real estate landscape.
Moreover, the national median home price has fully recovered, rising by an impressive 8.1% from January, according to CoreLogic this strong performance highlights the resilience and growth potential of the Australian real estate sector.
In December 2023, the index increased by 0.4%, leading to a quarterly rise of 1.5% and pushing the national median home price to nearly $758,000. This upward trend further demonstrates the strength and stability of the Australian real estate market as it moves into 2024. (See chart)
Can we expect affordable housing in 2024?
Dr. Nicola Powell, Domain‘s Chief of Research and Economics, anticipates a continued rise in house and unit prices throughout 2024. Despite persistent affordability challenges and restricted borrowing capacity, buyers may encounter difficulties in affording homes. Yet, Domain’s projections hint that implementing measures like lowering interest rates could stimulate demand, potentially resulting in a price upswing in the latter part of 2024.
Gareth Aird, the Head of Australian Economics at Commonwealth Bank, predicts a 5% average price hike in capital cities. Anticipating a gradual increase, he notes that the recent November rate hike may dampen buyer demand. However, Aird suggests that a potential rate decrease from September onward could boost prices by enhancing borrower capacity.
What are the Big Four Banks Forecasting for Property Prices in 2024?
As summarised by propertyupdate, Australia’s major banks, ANZ, CBA, NAB, and Westpac, have shared their predictions for Australian Real Estate Market for 2024.
ANZ anticipates a 6% increase in property prices across major cities. The highest growth is expected in Brisbane at 9% to 10%, followed by Perth (7%-8%), Sydney (6%-7%), and Melbourne (3%-4%). Moreover, it is projected that these cities will experience a positive trend in the property market.
CBA predicts a 5% increase in capital city property prices. Brisbane is expected to lead with a 6% growth, while Melbourne and Perth are projected to see a 5% rise. Sydney is forecasted to have a 4% increase, and Adelaide is predicted to see a 1% uptick.
NAB forecasts an average price increase of 5.4% across capital cities. Brisbane is expected to lead with a 6.5% growth, followed by Perth and Adelaide at 6.2%, Melbourne at 5.5%, and Sydney at 5%. Lastly, Hobart values are expected to stay flat.
Westpac predicts a 6% growth in combined capital cities. Perth is expected to have the highest growth at 10%, followed by Brisbane (8%), Sydney (6%), Adelaide (4%), and Melbourne (3%).
The rental market is expected to reach a tipping point, Domain says
The year 2023 posed difficulties for renters across the country. Nonetheless, the outlook for 2024 indicates a slight improvement with more favorable conditions.
Domain’s Rent Report for the December 2023 Quarter, showed that the median weekly asking rent for houses and units nationwide is $600. (See chart)
As of the end of 2023, rents were at all-time highs in the combined capital cities, except in Canberra.
Australia’s rental market is becoming a significant player in the housing sector, with more people choosing to rent for extended periods. This trend is expected to persist in 2024. However, there will come a point where rent growth slows down, and certain sub-markets achieve a more balanced rental environment. This shift will be influenced by stretched affordability.
Consequently, some renters may turn to shared housing, and incentives for first-home buyers could expedite the transition from renting to ownership, making it more affordable for some. Dr. Nicola Powell, the Chief of Research and Economics at Domain said.
Opportunities
While challenges exist, opportunities are also identified, especially in areas where market conditions are softening and listing volumes are rising. As buyers and investors seek more affordable options, there will be an increase in urban spread and gentrification. Consequently, buyers will explore suburbs and areas they might have initially overlooked, driven by a desire for affordability.
Fueled by the federal government’s ‘Help to Buy’ program, offering shared equity of up to 40% for a home, the push for affordability, particularly among first-home buyers, will be heightened.
Expected to kick off in 2024, the four-year initiative will be limited to residents in states that have endorsed the program through legislation, with all states expected to pass this legislation early this year. Consequently, demand for affordable homes, especially in larger cities, is likely to be boosted.
The Australian property market in 2024 presents a multifaceted scenario with varying forecasts, challenges, and opportunities. Buyers and investors are advised to stay informed, keeping an eye on market dynamics, interest rate changes, and regional variations.
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